Since November, the troubled retailer has sought a strategic partner for its $175 million ad account. The goal is to help Kmartdifferentiate itself from its sea of competitors, including market leader Wal-Mart Stores, positioned as the value-price merchandiser, and Dayton Hudson Corp.'s Target Stores, regarded as trendy.

After seven consecutive quarters of downward earnings, the No. 2 retailer is ready for some changes.

"Kmart wants to be in control vs. having to react to what our competition is doing," said Kenneth Watson, 52, Kmart's new exec VP-marketing and product development.

The former president-CEO of luxury retailer Little Switzerland believes Kmart's biggest obstacle is change and as an outsider, he was brought in to implement change.

"I am a firm believer that an advertising agency is not just someone who produces nice ads, but who can assist and help a corporation to strategically position itself," said Mr. Watson, who joined Kmart in October and is heading up the review.

And surprisingly, he's leaving the door open for incumbent Ross Roy Communications, Bloomfield Hills, Mich., who refused in November to participate in the review.

Kmart has talked with six agencies and plans to meet with a few more. Contenders include five New York agencies: Ally & Gargano, Ammirati & Puris/Lintas, BBDO Worldwide, Messner Vetere Berger McNamee Schmetterer/Euro RSCG and N W Ayer & Partners; along with Campbell Mithun Esty, Minneapolis.

After the talks with all the agencies have taken place, Kmart plans to narrow it to three candidates. Kmart will reveal its new business strategy to these candidates and give them a creative assignment.

"We will articulate the business plan to Ross Roy as well, and if they wish to do some creative as a result of that, I couldn't be happier," Mr. Watson said.

He emphasized that the review wasn't an issue of the agency's non-performance, but a way to explore other alternatives.

If this was not the case, "we would have fired them," he said. "Ross Roy is a valuable asset to the corporation and in the end, we may find that there is no place like home. I keep saying this and people don't want to believe me, including Ross Roy."

Mr. Watson had not yet decided whether he will break up the Kmart account, but sees it as three separate parts: institutional/corporate advertising, which will create a pre-emptive position against the competition; tactical advertising; and product category advertising.

He stressed that the corporate advertising will not be "feel good," but carry a message.

As a company, Mr. Watson said that it has to concentrate on doing things better like having products in stock and bringing more excitement at store level.